Ten Things You Must Know As An Entrepreneur About GST

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In the previous post we had touched some basics of GST, let’s dive more into it and know few important things about GST.

Must know these ten things about GST

As an entrepreneur, awareness about the applicable taxes on your business is an essential part. Lack of knowledge can lead to huge mess around your business. It is true that tax professionals are out there to help out in this regard. But basic awareness can help you to save time, money, anxiety and shrewd professionals as well.

1. GST applicable on ‘supply’

As per GST, all ‘supply’ such as sale, transfer, barter, lease, import of services etc of goods and/or services made for a consideration will attract CGST (to be levied by Centre) and SGST (to be levied by State).

As GST will be applicable to ‘supply’ the erstwhile taxable events such as ‘manufacture’, ‘sale’, ‘provision of services’ etc. will lose their relevance.

Further, certain supplies, even if made without consideration, such as permanent
transfer of business assets, self-supply of goods or services, assets retained after
de-registration etc will attract GST.

Most Interestingly, even a ‘barter’ of goods transaction which was hitherto un-taxed in VAT regime, will attract GST.

2. GST payable as per time of supply

The liability to pay CGST / SGST will arise at the time of supply as determined for goods and services.
In this regard, separate provisions prescribe what will time of supply for goods and services. The provisions contemplate payment of GST at the earliest for

  • ‘Goods’- Removal of goods or receipt of payment or issuance of invoice or date of which
    buyer shows receipt of goods
  • ‘Service’s– Issuance of invoice or receipt of payment or date of which recipient shows receipt of services.

It can be observed that there are many parameters in determining ‘time’ of supply. Thus, determining the ‘time’ of supply and further maintaining reconciliation between revenue as per financials and as per GST rules could be a major challenge to meet.

3. Determining Place of Supply could be the key

Previously Inter-State supply of goods was attracted Central Sales Tax (CST). Now, an inter-State supply of goods and/or services will attract IGST ((i.e. CGST plus SGST). Means 9%+9%=18%!!!
Thus, it would be crucial to determining whether a transaction is an Intra-State or Inter-State as taxes will be applicable accordingly.

But for Online Entrepreneurs, it is crystle clear as well as simple and attracts 18% IGST as ‘supply’ can be happen at any part of the country on Online Platform. 

Typically for ‘goods’, the place of supply would be a location where the good is delivered.
Whereas for ‘services’ the place of supply would be a location of the recipient.

4. Valuation in GST

GST would be payable on the ‘transaction value’. Transaction value is the price actually paid or payable for the said supply of goods and/or services between unrelated parties.

The transaction value is also said to include all expenses in relation to sale such as packing, commission etc. Even subsidies linked to supply will be includable. As regards discounts/incentives, it will form part of ‘transaction value’ if it is allowed after supply is affected.

However, discounts/ incentives given before or at the time of supply will be permissible as a deduction from transaction value.

5. Input tax credit in GST 

Current CENVAT Credit regime disallows CENVAT Credit on various services such as motor vehicle-related services, catering services, employee insurance, construction of civil structure etc.

Similarly, State VAT laws restrict input tax credit in respect of construction, motor vehicle etc. Current, this denial of credits leads to unnecessary cost
the burden on the assessee.

It was expected that in GST regime, seamless credit will be allowed to business houses without any denial or any restrictions except say goods/services which are availed for personal use than official use (something similar to United Kingdom VAT law).

However, surprisingly, inter-alia, an aforesaid credit would continue to be not available (in respect of both goods or services). Further, credit is proposed to be denied on goods and/or services used for private or personal consumption, to the extent they are so consumed.
This continuation of denial will lead to substantial tax cascading (as the rate of GST is higher than the current rate of service tax!).

7. There are 33 GST laws in India

For GST, there is one CGST law and 31 SGST laws for each of the State including two Union Territories and one IGST law governing inter-State supplies of goods and services.

8. Rate of GST

A Multi-Tired system:

Following are the rates of GST

0% In this category 50% of the consumer basket, including foodgrains, Exports.

05% Mass consumption items like spices and mustard oil etc.

12% Processed Foods etc.

18% Soaps, oil, toothpaste, refrigerator, smart-phones & digital businesses etc.

28% White goods, cars. Luxury Cars, pan masala, tobacco, aerated drinks etc.

We will discuss it in our another post dedicated to Rates of GST.

9. Time limit for show cause notices (SCN)

Time limit for issuance of SCN is generic cases (i.e. other than fraud, suppression etc) are three years and in fraud, suppression etc cases it is five years.

It is pertinent to note that the time limit prescribed for issuance of SCN for generic cases is much more than the previous time limit prescribed in excise law (i.e. 12 months) and service tax legislation (i.e. 18 months).

This will give much leeway to the Authorities while issuing SCN and sleepless night to assessees for three years!

10. Old provisions re-introduced

Most of the current provisions such as reverse charge, tax deduction, pre-deposit, Prosecution (!), arrest (!) etc are also continued in the GST law.

The new GST law is a new wine in the old bottle as most of the previous inefficiencies are there in GST law.

That’s it for this post. I hope you gained some insights from this post.

In the upcoming posts you will know about:

 Five Steps to be GST ready
 GST in India
 Rate of GST
 Supply Chain and GST
 GST – International Scenario (as we have global readers)
GST Model & Registration
 The special one “GST – E-Commerce and Digital Business

I will try to present it into pieces so that a normal person can absorb the information easily. I know this taxation part is so boring but very essential part of a business.

Please comment below regarding your doubts and questions about GST. Also, let me know what do you want to learn or expect from me?

Don’t lose your focus, stay connected and learn Entrepreneurship.

At the end I would again like to encourage you with another quote of mine:

“Entrepreneurship is an art,
which builds our society as a whole”. -Rajiv

Thanks for your valuable time, talk to you more about GST in next post.

#flyhigh & #LiveYourPassion